Tax IDs and Resale Certificates

Your first order of business: applying for a federal tax identification number for your company. Strictly speaking, if you’re going to establish as a sole proprietor or LLC, you don’t have to get a federal tax ID, says Alan E. Weiner, a CPA at Holtz Rubenstein Reminick in Melville, N.Y. But “you should apply for one anyway, so that your Social Security number does not have to be used if you need to issue 1099s or other documents.” If you’re setting up your company as a corporation, you will have to apply for the federal ID number anyway. The IRS allows you to do this online.

Now, to answer your question: Since you’re selling your jewelry to the retailer for resale — to consumers who will pay sales tax — you do not charge sales tax on your transaction. You must, however, obtain a resale certificate (Form ST-120) from the store owner. Because you’re based in New York, you can view Form ST-120 and the others mentioned here at the New York State Taxation & Finance Dept.’s Web site.

A resale certificate attests to the reason you collected no tax on a sale, and it’ll come in handy if you’re audited. Attach the certificate to the sales invoice or other evidence of sale that you retain as part of your records, and keep it for at least three years.